Solar Decarbonization And Policy Will Fuel Global Projects

Key Takeaways

• Accelerating long-term demand, policy-driven domestic advantages, and integration of advanced technologies position Nextracker for outperforming growth, margin, and market share gains.
  
• Transformation into a technology platform enables diversified recurring revenues and elevated profitability as global solar adoption and grid digitalization intensify.
  
• Reliance on fluctuating policy incentives, supply chain risks, intensifying competition, customer concentration, and evolving industry dynamics threaten Nextracker's margins, revenue stability, and long-term growth.

Catalysts

Provides solar tracker technologies and solutions for utility-scale and distributed generation solar applications in the United States and internationally.

• Analyst consensus expects near-term revenue growth from Nextracker's record $4.75 billion backlog, but the multi-year, uninterrupted streak of quarterly backlog growth-across volatile policy environments-is a sign of accelerating long-duration demand, suggesting potential for revenue growth well above current expectations.
  
• Analysts broadly agree that a flexible, localized U.S. supply chain positions Nextracker for growth, but the company's ability to rapidly expand domestic manufacturing and offer 100% U.S.-made content could allow it to dominate share in utility-scale projects if policy further tightens, providing sustained competitive margin and earnings upside much greater than anticipated.
  
• Nextracker's recent acquisitions in AI, robotics, and automation signal a transformation from a hardware manufacturer to a broader, technology-driven platform with new recurring revenue streams (e.g. "robot as a service"), which could structurally increase both top-line growth rates and long-term EBITDA margins.
  
• With solar now consistently making up more than 80% of new U.S. power generation and global projections showing solar overtaking all other energy sources within the decade, Nextracker's leadership and continual product innovation are uniquely positioned for outsized benefit as global electricity demand soars-implying market expansion and revenue compounding beyond what is priced in.
  
• Accelerated adoption of advanced module technologies (bifacial, high-efficiency panels) and the digitalization of grid operations are making sophisticated tracking and optimization platforms a universal requirement, positioning Nextracker's integrated solutions to capture a disproportionate share of industry profit pools and drive material upside to both margins and cash flow.

Nextracker Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Nextracker compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Nextracker's revenue will grow by 15.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 17.5% today to 15.4% in 3 years time.
• The bullish analysts expect earnings to reach $736.6 million (and earnings per share of $5.62) by about August 2028, up from $544.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 25.3x on those 2028 earnings, up from 15.1x today. This future PE is lower than the current PE for the US Electrical industry at 28.0x.
• Analysts expect the number of shares outstanding to grow by 3.15% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.58%, as per the Simply Wall St company report.

Nextracker Future Earnings Per Share Growth

Risks

• Nextracker's strong reliance on consistent U.S. policy incentives, including the Investment Tax Credit and safe harbor provisions, introduces material policy risk; changes or expiration of these incentives could delay projects, reduce demand, and ultimately impact revenue and earnings growth.
  
• Expansion of a highly globalized supply chain and heavy investments in new U.S. capacity make Nextracker vulnerable to rising global interest rates, tighter credit for solar projects, and potential geopolitical or tariff shocks, any of which could increase the cost of goods sold and weigh on net margins.
  
• The ongoing commoditization of solar tracker technology and increased competition from both established rival tracker companies and new entrants leveraging digital platforms may compress pricing power, driving down operating margins and threatening earnings consistency over time.
  
• Nextracker's customer base is concentrated among large, sophisticated developers and EPCs; if key customers pause projects during periods of regulatory uncertainty or shift to competitors, near
• and mid-term revenue visibility could deteriorate significantly.
  
• Industry risks such as potential long-term oversupply in solar hardware, growing competition from other forms of clean energy, and regulatory pressures to localize manufacturing in certain markets could each reduce Nextracker's future addressable market, raise operating costs, and place structural downward pressure on long-term profitability.

Valuation

• The assumed bullish price target for Nextracker is $89.79, which represents two standard deviations above the consensus price target of $69.84. This valuation is based on what can be assumed as the expectations of Nextracker's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $97.0, and the most bearish reporting a price target of just $38.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $4.8 billion, earnings will come to $736.6 million, and it would be trading on a PE ratio of 25.3x, assuming you use a discount rate of 8.6%.
  
• Given the current share price of $55.72, the bullish analyst price target of $89.79 is 37.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.